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Philippines Pharmaceuticals Sector Guide Prepared for: Embassy of Italy in Manila designed by Sector Guide - Pharmaceuticals embassy of italy in manila  embassy of italy in manila Table of Contents Sector overv...

Philippines Pharmaceuticals Sector Guide Prepared for: Embassy of Italy in Manila designed by Sector Guide - Pharmaceuticals embassy of italy in manila  embassy of italy in manila Table of Contents Sector overview Sector specific regulations FDI regulations Import and Exports Major trends Challenges Existing and Emerging Opportunities Major players, including Italian companies (if any) Major products/services Imports (from Italy to the Philippines) and Custom Duties for major products Sector Overview embassy of italy in manila Philippines Pharmaceuticals - embassy of italy in manila Sector Overview The Philippines pharmaceutical sector is estimated to be valued at US$4.1 billion in 2021 and the country is the third-largest pharmaceutical market in the ASEAN region after Indonesia and Thailand. It is among one of the countries with the highest out-of-pocket health expenditures in the region with out-of-pocket health expenditure making up to 45% of the current health expenditure in 2020. Pharmaceutical manufacturing: The gross pharmaceutical manufacturing value added was ranked among top 15 largest manufacturing segments of the Philippines and contributed to 2% of the country’s GDP in 2021. Currently, 14 out of the world’s top 20 pharmaceutical firms have manufacturing facilities in the Philippines. Up to 2022, there are 435 pharmaceutical manufacturing and packaging businesses have been licensed to operate in the Philippines by the country’s Food and Drug Administration (FDA). Pharmaceutical producers cluster in the National Capital Region, CALABARZON and Central Luzon region. There are 4 main types of manufacturers: »» Multinational-importer type which imports products from its regional production hub and gets the service of local manufacturer for packing/repacking/labelling. Some MNCs also use local toll manufacturers for the production of their formulations but the MNC is the marketing authorization holder (MAH). »» Toll manufacturer which simply manufactures for a trader using the trader’s own formulation; the trader holds the marketing authorization and takes care of registration requirements. »» Manufacturer-formulator which formulates its own product, procures own materials, conducts R&D for formulation, and manufactures (including packing and labeling) for itself and for other partner traders. Manufacturer-formulators are locally-owned establishments that usually conduct or invest in pre-production R&D, have their products undergo tests like the bioequivalence/bioavailability test and/ or bio-waiver test, and apply for drug registration. »» Importer/repacker which imports finished products in bulk, then conducts re-packing/re-labelling. Philippines Pharmaceuticals - embassy of italy in manila Sector Overview - B Pharmaceutical distribution: Local companies distribute their products through their divisions, subsidiaries, or other local distributors while almost all multinationals use Zuellig as their distributor. The Philippines pharmaceutical industry has approximately 500 medicines traders, 700 medicines importers, and 5,000 medicines distributors in 2018 Hospitals distribute 10% of the pharmaceutical products while drugstores distribute the bulk in 2021. Gross pharmaceutical manufacturing value added as Share of the pharmaceutical market sales in the Philippines, percentage of GDP by distribution channel Drug retail Public hospitals Private hospitals 2.5% 2.2% 2.0% 4% 2.0% 1.9% 1.9% 1.8% 6% 1.5% 90% 1.0% 0.5% 0.0% 2016 2017 2018 2019 2020 Philippines Pharmaceuticals - embassy of italy in manila Pharmaceuticals Gross Value Added in Manufacturing In here, we have highlighted the gross value added in manufacturing for pharmaceutical sectors, along with the key contributing sectors. Gross Value Added in Manufacturing, by Industry (at current prices and Euro billions) 2017 2018 2019 2020 2021 CAGR -0.4% € 16.00 € 14.00 CAGR 5.7% CAGR 0% € 12.00 CAGR 1.9% € 8.00 CAGR -11.1% € 6.00 € 4.00 € 2.00 € 0.00 Manufacture of basic Manufacture of coke Manufacture of Manufacture of Others pharmaceutical and refined petroleum chemical and chemical computer, electronic products and products products and optical products pharmaceutical preparations Philippines Pharmaceuticals - embassy of italy in manila Pharmaceutical Manufacturing Workforce and Establishments Workforce Number of manufacturing establishments and revenue Paid employee Workers in sub-contract Number of establishments Revenue (Euro billions) 140 € 1.80 16% € 1.60 120 € 1.40 100 84% € 1.20 80 € 1.00 60 € 0.80 € 0.60 40 € 0.40 20 € 0.20 0 € 0.00 2012 2018 During 2012-2018, total workforce in the industry expanded by 3.6% and The industry experienced a consolidation when the number of ultimately reached over 14,100 workers, with the dominant share being manufacturing establishments declined from 124 in 2012 to 117 in 2018. paid employees. On the other hand, revenue of this manufacturing industry had grown Value added per employee (Labor productivity) was estimated at substantially with a CAGR (2012-2018) of 7.9% and reached EUR1.57 EUR75,530 in 2018. billion in 2018. Philippines Pharmaceuticals - Growth in embassy of italy in manila Pharmaceutical sector In here, we have highlighted the growth in the gross value added in manufacturing for pharmaceutical sectors, compared with the overall growth in the manufacturing sector. During 2016-2019, the growth rate of value added from pharmaceutical manufacturing remained negative. However, in 2019-2020, the industry had minor suffering from Covid-19 when its value added growth rate contracted by only 0.3%, which was insignificant compared to that of the whole manufacturing sector at -12.3% Notable in 2020-2021, the pharmaceutical manufacturing industry expanded at an outstanding rate of 12.4% in terms of value added. Growth of Gross Value Added in Manufacturing, by Industry (% in current prices) 15.0% 12.4% 10.0% 8.9% 8.0% 8.0% 5.0% 3.6% -1.8% -3.1% -0.7% 2019-2020 0.0% 2018-2019 -0.3% 2020-2021 2016-2017 2017-2018 -5.0% Manufacture of basic pharmaceutical -10.0% products and pharmaceutical preparations -12.3% -15.0% Gross Value Added in Manufacturing Philippines Pharmaceuticals - embassy of italy in manila Growth Drivers The Philippines has a growing population coupled with a rising GDP per capita. Its population grew at GDP per capita a CAGR of 1.36% from 2017 to 2021. GDP per capita was EUR3,213 in 2021, or an increase of 5.1% from the previous year’s GDP per capita of EUR3,057. € 3,300 € 3,200 An aging population and greater incidence of lifestyle-related diseases will see increased consumer € 3,100 spending on pharmaceuticals. In 2019, Filipinos under 15 years of age made up about a third of the € 3,000 Philippine population, while approximately 64 percent were Filipinos 15 to 64 years old. Meanwhile, the growth rate of the elderly population, those who are 65 years and above, has been gradually increasing € 2,900 through the years because of the longer life expectancy of Filipinos. € 2,800 € 2,700 2017 2018 2019 2020 2021 Heavy protection for patents and trademarks under the Intellectual Property Code of the Philippines. The strong patent and trademark laws in the country will help protect innovation and encourage foreign GDP per capita investment in the healthcare market. The planned deployment of “pharma zones” in the country’s Bulacan province will accelerate the Population Age Structure, 2029 sector’s growth. Presidential Proclamation No. 1070, released in early 2021, aims to expand already- 0-14 15-64 65+ existing business zones in Malolos, Bulacan, to form the First Bulacan Business Park (FBBP), a mixed- use ecozone of medical research, manufacturing, and tourism businesses. FBBP is envisioned to host 6% pharmaceutical manufacturing facilities to help stabilize the COVID-stricken economy and lower the country’s reliance on medical imports 30% The government is strongly encouraging generic substitution in the public and private sectors. 64% Philippines Pharmaceuticals - Consumer embassy of italy in manila Expenditure on Health In here, we have highlighted the Household Final Consumption Expenditure on Household Final Consumption Expenditure on health products and services by the local population. Health (in current prices and Euro billions) In 2017, household expenditure on health accounted for 4% of the total figure. Amount Growth rate € 14.0 20.0% Until 2021, household expenditure on health products experienced a CAGR of 18.0% 8.4% and ultimately made up 4.6% of the total household spending. € 12.0 16.0% € 10.0 14.0% It is estimated that spending on pharmacies accounted for over 28% of the € 8.0 12.0% country’s current health expenditure, next to hospital spending. 10.0% € 6.0 8.0% 6.0% The National Capital Region, CALABARZON, and Central Luzon had the biggest € 4.0 4.0% share of health expenditure, and the highest and above average current health € 2.0 2.0% expenditure per capita. Together, these regions comprise the Greater Capital € 0.0 0.0% Region and the pharmaceutical market. 2017 2018 2019 2020 2021 Total Household Final Consumption Expenditure includes food and beverages, as well as others such as clothing, utility, health, transport, education, restaurants, and other miscellaneous goods and services. Sector specific regulations embassy of italy in manila Philippines - Sector Regulations - Laws - A embassy of italy in manila OVERVIEW The Food and Drug Administration (“FDA”) is the regulatory authority under the Philippine Department of Health (“DOH”) that implements the FDA Law. The FDA is responsible for the regulation of all health products, including medicines, medical devices as well as food and cosmetics. For pharmaceuticals, the Center for Drug Regulation & Research (CDRR) under the FDA oversees licensing and accreditation of pharmaceutical establishments; pre-marketing assessment and market authorization; and post-marketing surveillance including pharmacovigilance, inspections of pharmaceutical establishments, quality monitoring of marketed products and monitoring of pharmaceutical claims and promotion. Due to the geopolitical nature of the Philippines, the FDA also operates regional field offices. To ensure that product quality standards are complied with, among others, the FDA requires entities that manufacture, import, export, sell and distribute food products to obtain a License to Operate (“LTO”) from the FDA for their intended activities. These entities also require a Certificate of Product Registration (“CPR”) for each pharmaceutical product that they manufacture, import, export and market in the Philippines. Before applying for a CPR, manufacturers/importers/distributors/traders shall secure the LTO. For a comprehensive list of Establishments and Health Products with License to Operate (LTO) and Certificate of Product Registration (CPR), Please refer to: https://verification.fda.gov.ph/Home.php For further information on registration and establishment licensing requirements, please refer to: https://www. fda.gov.ph/downloadables/ Philippines - Sector Regulations - Laws - B embassy of italy in manila LAWS The main laws governing the pharmaceutical sector are as follows: Medical Act (1959) - The “Medical Act” (as amended by Republic Act Nos. 4224 and 594) was enacted to provide the standardization and regulation of medical education, the examination for registration of physicians; and the supervision, control and regulation of the practice of medicine in the Philippines. Under this Act, the Board of Medical Education under the Department of Education, and the Board of Medical Examiners under the Commissioner of Civil Service was created. Food, Drug and Cosmetic Act (1963) - The “Food, Drug and Cosmetics Act” was enacted to ensure the safety and purity of foods, drugs, and cosmetics. Made available to the public. Under this Act, the Philippine Bureau of Food and Drugs (BFAD), the former entity of the Food and Drug Administration (FDA), was created under the Department of Health (DOH). Generics Act (1988) - The “Generics Act” aims to promote, require and ensure the production of an adequate supply, distribution, use and acceptance of drugs and medicines identified by their generic names. Consumer Act (1991) - This Act was enacted to protect the interests of consumers through the promotion of public health and safety measures, and the prevention of deceptive and unfair acts of unscrupulous businessmen. The Price Act (1993) - The Act provides protection to consumers by stabilizing the prices of basic necessities and prime commodities and by prescribing measures against undue price increases during emergency situations and like occasions. Philippines - Sector Regulations - Laws - C embassy of italy in manila LAWS (continued) Special Law on Counterfeit Drugs (1996) - This Act aims at protecting human and animal health through provisions against counterfeit drug. The Bureau of Food and Drugs and the Department of Health involves to implement the provisions of this Act. Intellectual Property Code of the Philippines (1997) - The Intellectual Property Code of the Philippines was enacted to protect and secure the exclusive rights of scientists, inventors, artists and other gifted citizens to their intellectual property and creations Comprehensive Dangerous Drugs Act (2002) - This Act provides for importation of dangerous drugs and controlled precursors and essential chemicals Government Procurement Reform Act (2002) - This Act aims to promote the ideals of good governance in all its branches, departments, agencies, subdivisions, and instrumentalities, including government-owned and controlled corporations, and local government units Universally Accessible and Quality Medicines Act (2008) - This Act (Republic Act 9502) was enacted by the Senate and House of Representatives of the Philippines in Congress to protect public health by promoting and ensuring access to quality affordable medicines Food and Drug Administration (FDA) Act (2009) - This Act aims to protect and promote the right to health of the Filipino and to establish and maintain an effective health products regulatory system. This Act created the Food and Drug Administration in the Department of Health to replace the Bureau of Food and Drugs. Philippines - Sector Regulations - Laws - D embassy of italy in manila REGULATORY BODIES The main regulatory bodies monitoring the safety and quality aspects of imported agriculture and food products are the Department of Health (DOH) Food and Drug Administration (FDA) Philippine Health Insurance Corporation (PhilHealth) Philippines - Sector Regulations – Licenses embassy of italy in manila to Operate LICENSE TO OPERATE The Administrative Order No 2014 – 0034 on the Rules and Regulations on the Licensing of Establishments Engaged in the Manufacture, Conduct of Clinical Trial, Distribution, Importation, Exportation and Retailing of Drug Products, and Issuance of Other Related Authorizations provides general and detailed guidelines for each type of pharmaceutical entity to legally operate in the Philippines by obtaining the LTO. In general, the application for LTO follows the below process: Step 1: Filing of applications An application of LTO, whether initial, renewal, or variation, and other authorization are deemed filed upon submission of compete requirements including payment of required fees and charges. Step 2: Evaluation The FDA shall evaluate all applications for LTO based on satisfactory compliance to the applicable requirements. Should there be any clarification on the application, a notification either written or through email shall be sent to the applicant. Step 3: Inspection a. Pre-opening inspection Applications for LTO of drugstores, RONPSs, sponsors, and CROs, pre-opening inspection may be waived provided all necessary requirements are complied with. Nevertheless, on-site verification may be done if deemed necessary. Philippines - Sector Regulations – Licenses embassy of italy in manila to Operate - B Applications for LTO of drug manufacturers and distributors are required to be inspected for compliance with existing requirements and standards. b. Post-licensing inspection All establishments, after approval and issuance of their LTP, are subject to post-approval inspection as part of post-marketing surveillance activities to monitor continuous compliance with existing requirements and standards. Step 4: Decision on approval This processing of LTO for distributors, importers and retailers takes 30 calendar days to complete. However, in reality, getting the license to operate at the retail level may take up to 6 months. Further, the inspection process for drug manufacturers entails 60 days. After the inspection, manufacturers go to FDA for processing and evaluation. The license is released upon compliance. The whole licensing process, which is done electronically (i.e., e-LTO) since September 2016, takes approximately 90 calendar days. Philippines - Sector Regulations - Drug embassy of italy in manila Application and Registration DRUG APPLICATION AND REGISTRATION The Philippines formally adopted the Associations of Southeast Asia Nations (ASEAN) common technical dossier (ACTD) and common technical requirements for the registration of pharmaceutical products for human use. Validity Period The process begins with the submission of an electronic copy application using the Type of license Integrated Application at the Public Assistance, Information and Receiving (PAIR), by Initial Renewal appointment schedule of an applicant company (which may be a manufacturer, trader, or distributor). License to Operate 3 years 5 years Once an applicant submits the dossier, CDRR evaluates the documents and determines if the product meets the standard of safety, efficacy, and quality. If the products meet these standards, a CPR is issued valid for 5 years. Should deficiencies be noted, depending on the Certificate for Product criticality, a Notice of Deficiency (NOD) or Letter of Disapproval (LOD) may be issued. 3 years 5 years Registration CPRs issued by the FDA are given 5 years validity. For continuous marketing authorization after the validity, the MAH shall apply for renewal of registration. Submission of the Certificate for Product application for renewal shall be on or 120 days before the expiration date of the CPR. 1 year 1 year Notification Renewal shall be accepted when the prescribed renewal fee is paid. Drug registration process takes 254 calendar days for initial drug registration. For automatic renewal (no variation to original registration), the process takes 31 calendar days, while the processing for regular renewal depends on the variation of the drugs being registered. Philippines - Sector Regulations - Labelling embassy of italy in manila All health products must be labeled and conform the requirements on labeling set by the FDA to protect consumers against health hazards and promote safety. The “Rules and Regulations Implementing Republic Act No. 9711 -The Food and Drug Administration Act of 2009” governs the labelling requirements for drugs, whether imported or locally produced and distributed in the Philippines MINIMUM INFORMATION The following are the minimum mandatory information that shall appear in the labeling materials accompanying a drug product: (a) Product Name (o) For prescription drug products, Rx Symbol and (f) Overdose and Treatment (c) Pharmacologic Category Caution Statement (0) Net Content or Pack Size (e) Indication(s) (q) Registration Number (n) Name and Address of Manufacturer (g) Contraindication(s), Precaution(s), Warning(s) (s) Expiration Date and Date of Manufacture (p) ADR Reporting Statement (if applicable) (b) Dosage Form and Strength (r) Batch Number and Lot Number (if any) (i) Adverse Drug Reaction(s) (d) Formulation/Composition (k) Storage Condition(s) (f) Dosage and Mode of Administration (m) Name and Address of MAH (h) Interactions Further guidelines on each components can be found at the Administrative Order 2016 – 008 Revised Rules and Regulations Governing the Generic Labelling Requirements of Drugs for Human Use LABEL LANGUAGE Under the Labeling Rules, the language used for all information on the label of products must be either English or Filipino or a combination thereof. For products intended for export, the language acceptable to the importing country shall be used. In the case of imported products, labels where the information appears in a foreign language shall always carry the corresponding English translation. Philippines - Sector Regulations - embassy of italy in manila Advertisement - A ADVERTISEMENT Administrative Order 2015-0053 issued by the DOH or the Implementing Guidelines on the Promotion and Marketing of Prescription Pharmaceutical Products and Medical Devices (“PPPMD Guidelines“) provides for detailed rules and guidelines on the advertising and promotion of medicines and medical devices to the public and healthcare professionals Additionally, the following industry codes and guidelines apply to the advertising of medicines: Mexico City Principles for Voluntary Codes of Business Ethics in the Biopharmaceutical Sector (“Mexico Principles“), which calls upon the entire biopharmaceutical sector and eco-system to embrace aligned standards for ethical interactions, including: companies and industry associations, healthcare professionals (“HCP“) and organizations and government regulators and anti-corruption enforcement authorities; Code of Ethics of the Ad Standards Council (“ASC“); Pharmaceutical and Healthcare Association of the Philippines (“PHAP“) Code of Practice (“PHAP Code“) Code of Ethics of the Philippine Medical Association (“PMA“) (“PMA Code“) and its implementing guidelines. The self-regulatory and industry codes do not have the force of law. However: The Consumer Act IRR provides that all advertising materials shall conform to the the ASC. The ASC Code of Ethics impose sanctions on its members that violate its rules of conduct; The PMA Code considers violations thereof as unethical conduct and shall be a sufficient ground for reprimand, suspension or revocation of certificate of registration of the offending party member; and Philippines - Sector Regulations - embassy of italy in manila Advertisement - B The PHAP imposes penalties on its members for violations of the PHAP Code. In practice, the FDA may consider the provisions in the PHAP Code to determine industry practice with respect to a particular issue, and how conduct that is complained of measures against industry practice. Depending on the medium / material of advertisement, advertising materials may require post-screening or pre-screening by the ASC. Under the PPPMD Guidelines, all advertising, promotional or other marketing materials, whether written, audio or visual, for products within the scope of such order, may be subjected to a post-audit by the FDA and if any should be found to violate any FDA provisions, a cease and desist order and/or penalties and/or fines shall be issued by the FDA. ADVERTISEMENT ON PRESCRIPTION MEDICINES Pharmaceutical products classified by the FDA as a prescription or ethical drug may not be advertised or promoted in any form of mass media, except through medical journals, publications and/or literature solely intended for medical and allied professions. Philippines - Sector Regulations - embassy of italy in manila Advertisement - C ADVERTISEMENT ON OTC MEDICINES OTC medicines may be advertised to the public and HCPs, subject to the requirements and restrictions under the FDA Act and other applicable rules and industry codes. Under the ASC Code, some restrictions are, as follows: Advertisements for non-prescription drugs, devices and treatments should not describe or dramatize distress (e.g., death or serious illness) in a morbid manner. Advertisements should not offer false hopes in the form of a cure or relief for the mentally or physically handicapped either on a temporary or permanent basis. Non-prescription drugs, devices treatments may not be directly or indirectly advertised as the answer to conditions of premature aging or loss of virility, unless officially so approved in writing by the FDA FDI regulations embassy of italy in manila Philippines - FDI Regulations embassy of italy in manila Republic Act 7042, also known as the “Foreign Investments Act of 1991,” (FIA), is a law regulating foreign investments in the Philippines. This act allows foreign investors to invest up to 100% equity in domestic market enterprises, but also sets restrictions via the Foreign Investment Negative List (FINL), which is a list of areas of economic activity where foreign ownership is restricted or limited. The latest 12th FINL has the list of sectors that does not allow foreign equity at all to sectors that restrict foreign equity between 25% to 40% depending on several factors. One hundred percent (100%) foreign equity may be allowed in all areas of investments under the Foreign Investments Act (FIA),except those included in the Foreign Investment Negative List (FINL). Pharmaceuticals sector is largely open completely to foreign investors, except one area highlighted in FINL, where foreign ownership is limited to 40%. »» Manufacture and distribution of dangerous drugs, which have implications on public health and morals Import and Exports embassy of italy in manila Philippines - Total Imports and Exports of embassy of italy in manila Pharmaceuticals - A As per the Philippine Standard Commodity Classification (PSCC), DSA has focused on the below product group as per classification for trade data; “HS Chapter 30: Pharmaceutical products” 3001 - Glands and other organs for organotherapeutic uses, dried, whether or not powdered; extracts of glands or other organs or of their secretions for organotherapeutic uses; heparin and its salts; other human or animal substances prepared for therapeutic or prophylactic uses, not elsewhere specified or included 3002 - Human blood; animal blood prepared for therapeutic, prophylactic or diagnostic uses; antisera, other blood fractions and immunological products, whether or not modified or obtained by means of biotechnological processes; vaccines, toxins, cultures of micro-organisms (excluding yeasts) and similar products; cell cultures, whether or not modified 3003 - Medicaments (excluding goods of heading 3002, 3005 or 3006) consisting of two or more constituents which have been mixed together for therapeutic or prophylactic uses, not put up in measured doses or in forms or packings for retail sale 3004 - Medicaments (excluding goods of heading 3002, 3005 or 3006) consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses (including those in the form of transdermal administration systems) or in forms or packings for retail sale 3005 - Wadding, gauze, bandages and similar articles (for example, dressings, adhesive plasters, poultices), impregnated or coated with pharmaceutical substances or put up in forms or packings for retail sale for medical, surgical, dental or veterinary purposes 3006 – Other pharmaceutical goods Philippines - Total Imports and Exports of embassy of italy in manila Pharmaceuticals - B Due to the limited number of drug manufacturers in the Philippines, the country had Philippines’ imports and exports of been highly reliant on the imports of both raw materials and finished drug products to pharmaceutical products fulfill the growing domestic demand. Export Import Balance The Philippines remains a net importer of pharmaceutical products with increasing €4 Billions trade deficit over the last decade: €3 Export value grew at a CAGR (2011-2021) of only 1.79% and reached EUR57.2 million in 2021. €2 €1 Meanwhile, import value increased at a strong CAGR (2011-2021) of 15.84% CAGR and recorded at EUR3.3 billion in 2021. Notably, import value in 2021 was 2.2 times €0 greater than that of 2020. 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 -€1 Consequently, Philippines’ trade deficit for this product group expanded at a CAGR (2011 -2021) of 16%. -€2 -€3 -€4  embassy of italy in manila Philippines - Total Imports and Exports of Pharmaceuticals - C IMPORT EXPORT by products by products Philippines’ imports of pharmaceutical products Philippines’ exports of pharmaceutical products 3001 3002 3003 3004 3005 3006 3001 3002 3003 3004 3005 3006 € 2,500 50 Millions Millions € 2,000 40 € 1,500 30 € 1,000 20 € 500 10 €0 0 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 Two imported product group in highest demand have been: Two key export products of the Philippines in the sector have been 3002 (Human and animal blood; vaccines, toxins, etc.): During 2017-2020, 3004 (Medicaments, in the form of lacking for retail sale): Export value of this import value fluctuated between EUR 250 – 320 million. In 2021, import value product has been over 70-80% of total pharmaceutical exports of the Philippines of this product grew by nearly 7 times compared to the previous year and in the last 5 years. However, export value has been minor compared to import reached EUR1.9 billion. This was due to the importation of Covid-19 vaccines. figure. In 2021, export value of the product was recorded at EUR43.8 million. 3004 (Medicaments, in the form of lacking for retail sale): Import value has 3005 (Wadding, gauze, bandages and the like): Export value of this product has been stable between EUR1.16 – 1.27 billion in the last 5 years. grown significantly during 2017 – 2021 at a CAGR of 41.3% and reached EUR 10.5 million in 2021.  embassy of italy in manila Philippines - Total Imports and Exports of Pharmaceuticals - D IMPORT EXPORT by markets by markets Philippines’ pharmaceutical import share, 2021 Philippines’ pharmaceutical export share, 2021 USA Singapore 23% 19% China Thailand 33% 37% Japan Germany 15% 19% Hong Kong India India 12% Belgium 10% 8% 7% 9% 8% Others Others Top suppliers of pharmaceuticals to the Philippines are USA, Top markets for Philippines pharmaceutical are Asian countries, China, Germany, India and Belgium including Singapore, Thailand, Japan, Hong Kong and India. Other major exporters are South Korea, France, Italy, Indonesia Other notable importers are Myanmar, the US, Australia, and Russia Indonesia, and Malaysia. Major Trends embassy of italy in manila Philippines Pharmaceuticals - Major embassy of italy in manila Consumer Trends Increase in the demand for generic medicines The Philippines have some of the highest medicine costs among the ASEAN countries with consumers purchasing more of the generic medicines than the branded products. It is estimated that the generic medicines segment will be approximately 64% of the total retail medicine sector in the Philippines by the year ending 2025. Change in Attitude towards Health & Wellness Due to Covid 19 Outbreak Philippines witnessed some of the strictest lockdown regulations in the world. As per a survey by Ken Research, ~68% of the population plans to improve personal self-care for future health issues, ~38% population feels OTC medications should be consumed for better health and to be prepared for future health crisis, ~35% population feels medicines should be purchased of a trusted brand from a trusted source and overall ~60% population wants to improve planning for their future well being. Most Common Diseases The Philippine health statistics point to a high incidence of acute respiratory tract infection, hypertension, and pneumonia countrywide, indicating a big demand for medicines that can prevent or treat these diseases. Concentrated Regions In terms of the recorded number of diseases per region, three regions contribute the highest percentage: National Capital Region, Ilocos Region, and Eastern Visayas. Philippines Pharmaceuticals - Major Trends – embassy of italy in manila Market Consolidation The market is witnessing a higher degree of concentration. Manufacturers There are fewer local manufacturing facilities now and the Philippine government does not require foreign firms to establish manufacturing plants in the country for them to operate. Industry actors raised concern that the pharmaceutical manufacturing sector is shrinking in terms of number of manufacturers. According to the Census of Philippine Business and Industry (CPBI), the number of drug manufacturer establishments declined by 5.6% during 2012-2018. There is also an emerging pattern of integration by producers – doing end-to-end services from manufacturing to distribution to marketing, to testing for bioequivalence of generic medicines and then to hospital service. Retailers The organized pharmacy retail chains are growing aggressively in the Philippines. In order to achieve speedy growth, the pharmacy chains are acquiring the independent pharmacies and regional chains as it helps them to save the costs and operations to open a pharmacy store and building it up from scratch. Manila, Central Luzon, Bicol Region have been key target regions for opening new pharmacies. The semi-urban and rural regions are also potential targeted areas of pharmaceutical chains. As the market is becoming concentrated day by day, the companies are focusing on opening the stores in different provinces and less developed regions of the country especially in the Visayas Islands. Challenges embassy of italy in manila Philippines Pharmaceuticals - embassy of italy in manila Challenges - A Lengthy drug registration process This lengthy drug registration process is a hurdle that gets in the way of timely product launches for companies to recover their investments. Pharmaceutical manufacturing has become more capital intensive than ever before. While all industry players, big and small, manufacturers and importers, face the same predicament, the extent of effects varies depending on the nature of the activities undertaken by pharmaceutical companies. Big pharmaceutical manufacturers can spread the costs of such investments, while smaller ones have lower capacity to recover from business losses. Between importing and producing the goods locally, the findings suggest that there is greater incentive in importation since a company does not have to: (1) invest heavily on infrastructure, and (2) conduct expensive R&D and bioequivalence tests. Reliance on imports While the Philippine pharmaceutical market grows quite robustly, the trend is towards greater reliance on imported medicines and materials. Problem with counterfeit drugs The FDA notes that counterfeit drugs exist in the market and the real magnitude is unknown. In recent reports, Paracetamol is said to have been targeted by counterfeit drug producers. In January 2018, some EUR2.7 million-worth of counterfeit medicines were seized in Manila. The Philippine President has since ordered the crackdown on all facilities that are involved in the production of counterfeit drugs. embassy of italy in manila Philippines Pharmaceuticals - embassy of italy in manila Challenges - B The uncertain pricing regulations and the government’s price ceiling on some medicaments According to the Executive Director of Pharmaceutical and Healthcare Association of the Philippines, Teodoro Padilla, the price ceiling on medicaments may result in discontinued operations of small retailers and uncertainty to manufacturers to launch new medicaments. On the other hand, Fitch Solutions stated that the lower prices of medicaments may impact the growth in demand positively which in turn would attract more suppliers to the country. Lack of suitable trained labor Industry informants, the FDA, a testing center and a chain drugstore, all emphasized the challenge of getting qualified people. A testing center claimed that once trained, many of its people are enticed to join lucrative pharmaceutical companies; its rate of turn-over is quite high. FDA also noted that it is very difficult to get people with technical skills who can work in the evaluation of drug registration applications, and it would take up to 6 months to train a chemist in the production of medicine. Retailers have difficulty in hiring pharmacists as well. Many establishments find it difficult to follow FDA’s regulation which requires one pharmacist for each drugstore. Although there may be many sources of pharmacy graduates, pharmacists have different fields of expertise (e.g. retail, industrial, research pharmacist, among others) and therefore, not all of them are skilled enough to man drugstores. A large pharmaceutical retail company emphasized this challenge as a significant blunder. embassy of italy in manila Existing and Emerging Opportunities embassy of italy in manila Philippines Pharmaceuticals - Existing embassy of italy in manila and Emerging Opportunities - A Manufacturing Opportunities is especially notable in the form a joint venture with a local manufacturing company. Since 2018, the DOH has been promoting foreign investments from international pharmaceutical companies, particularly those from India and members of the European Union, to set up manufacturing facilities in the Philippines. These efforts may result in partnerships between foreign and local manufacturers, which may help to increase production of medicines in the country and reduce the prices of drugs in the Philippines Another emerging opportunity in the segment is to supply a local drug retailer’s house-brand medicament. The majority of pharmaceutical sales take place through retail pharmacies. Pharmacy chains like Mercury, Watsons, TGP Generika are expanding into house-brands. The prices of house-brands are lower than those of branded or uni-branded generic. Introducing a house-brand gives the drug retailers an advantage since retailers do not need to conduct heavy sales and marketing efforts to promote the brand. Also, there is a lesser need for a brand development, as brand recall is somewhat linked to the pharmacy. Additionally, Investments are sought in the manufacture of Active Pharmaceutical Ingredients (APIs) as raw materials are almost 98% imported. Only a few local materials are available in the country, i.e., herbal raw materials, sugar, and alcohol. Distribution Italian investors can also find opportunities in the wholesale distribution of pharmaceutical products; as well as the importation, directly or through partners, into the country of branded products that can compete with those of the more well-known brands, including branded generics. Philippines Pharmaceuticals - Existing embassy of italy in manila and Emerging Opportunities - B Retails Pharmaceutical retailing is undergoing rapid transformation as the pandemic is putting the sprawling brick- and-mortar drugstore chains on “dry dock” mode. Filipinos have been “forcibly” introduced into e-commerce and ad hoc solutions have emerged overnight. In some cases, consumers are finding out that their online purchases are cheaper than their drug store purchases. In such context, an integrated online retailing portal combined with properly executed logistics is a model offers an opportunity to disrupt the entrenched players in the industry. Clinical trials The Philippines is an emerging destination for global clinical trials. The capital, Manila offers access to a diverse pool of treatment-naive patients for most therapeutic areas and represents a global destination of choice for cost-effective clinical trials. According to the World Health Organization, there were 722 clinical trials conducted in the Philippines in 2019, ranked the 4th among ASEAN countries after Thailand, Singapore and Malaysia and the 12th among Asian destinations. Major players embassy of italy in manila Philippines Pharmaceuticals - Major embassy of italy in manila Producers, Importers and Distributors The Philippine pharmaceutical industry is comprised of a mixture of multinational corporations (MNCs) and local manufacturers and distributors. The Philippine pharmaceutical industry remains dominated by multinational companies (MNCs) such as GlaxoSmithkline Philippines, Pfizer, Wyeth, Abbott Laboratories, Novartis, Astrazeneca, Sanofi-Aventis, Johnson & Johnson, Boehringer Ingelheim, Roche, Bristol Myers Squibb, Bayer, Schering Plough, MSD, Servier Philippines, and Merck Inc. MNCs are engaged mostly in the marketing and distribution of finished medicine products as well as raw and intermediate materials.. Meanwhile, local pharmaceutical companies have more diverse roles in the supply chain. There are Filipino-owned manufacturers which are manufacturing for themselves and/or for other companies. The local manufacturers include United Laboratories (along with its subsidiaries namely Asian Antibiotics, Amherst, and Westmont), Pascual Laboratories, AMEuropharma, AD Drugstel, Euro-med, among others. The other manufacturers are so-called toll manufacturers because they are primarily contracted by drug traders to manufacture, process, package, or repackage the latter’s drug products. These companies include Lloyd laboratories, Hizon Laboratories, Swiss Pharma, Ace Pharmaceuticals, and Allied. The two groups are not mutually exclusive such that there are companies which exhibit the characteristics of both groups. Pascual and United Laboratories, for instance, manufacture their own brands and distribute these through their own subsidiaries. Prescription Drugs Over-the-Counter Drugs Philippines Pharmaceuticals - Major Retailers embassy of italy in manila Drugstores in the Philippines not only sell medicines but also stock on other everyday items, playing the role of a convenience store at times. The pharmacy retail network is robust, led by two principal retail companies, the Generics Pharmacy with over 2,000 outlets and Mercury Drug with over 1,100 drugstores all over the Philippines. In regions outside of the highly urbanized areas of the country, these groups have a strong presence, either through company-owned outlets or franchised outlets, supplemented by region-based pharmacies in the area. The drugstore market in the Philippines is becoming increasingly competitive. Smaller pharmacy retail chains like Watsons are challenging the bigger pharmacies by aggressively increasing their outlet count across the Philippines A business expansion strategy of some drugstore retailers is forming partnerships or joint ventures with major mall retailers such as SM Prime Holdings, Ayala Corporation, and Robinsons Retail. The synergy with mall retailers allows the drugstore chains to open more outlets in strategic places in the Philippines. Philippines Pharmaceuticals - Presence of embassy of italy in manila Italian companies Despite significant opportunities for foreign pharmaceutical businesses, Italian companies have little presence in the Philippines. The largest Italian player in the market has been Menarini Philippines Inc. a wholly owned subsidiary of leading Italian pharmaceutical company Menarini Group. Merarini specializes in commercialization of differentiated pharmaceutical and OTC brands and currently operate a local office in Taguig City, Philippines. Merarini Philippines, along with the APAC network of the group, account for 15% of the total global sales of Merarini every year. Major Product /services embassy of italy in manila Philippines Pharmaceuticals - Prescription embassy of italy in manila Drugs Top Ethical Pharmaceutical Class Description Total Market Share (%) Cephalosporin (antimicrobial) 5.0 Broad spectrum penicillin (antimicrobial) 4.9 ARB plain (antihypertensive) 4.0 Cholesterol regulator (anticholesterolemia) 3.8 DPP4 inhibitor (antidiabetic) 3.4 ARB combination (antihypertensive) 3.4 Calcium antagonist plain (antihypertensive) 3.2 Antiulcerant 2.7 Antirrheumatic non-steroid 2.7 Human insulin analogs (antidiabetic) 2.4 Philippines Pharmaceuticals - Over-the- embassy of italy in manila Counter Drugs Top 10 medicines required by the Department of Health (DOH) based on its 2017 Procurement Plan for drugs, medicines, and nutrients Item Description Total Quantity Calcium Carbonate 500mg Elemental Calcium (for pregnant women) 539,913,027 Iron tablets with 400mcg folic acid for pregnant women (anemic) 280,927,080 Iron tablet with 400mcg folic acid for pregnant women (non-anemic) 125,045,640 Iron tablets with 400mcg folic acid for 10- 49 WRA clinically Dx 100,236,136 Micronutrient powder for 12-23 months clinically Dx anemia 84,986,400 Micronutrient powder for 6-11 months clinically Dx anemia 67,989,000 Iron tablets with 400 mcg folic acid for post-partum/ lactating women 51,394,720 clinically Dx Micronutrient powder for 6-11 months 50,991,840 Diethylcarbamazine Citrate (DEC 28,818,100 Vitamin A 200,000 IU 12-59 months 22,663,022 Imports (from Italy to the Philippines) and Custom Duties embassy of italy in manila Philippines Pharmaceuticals - Italian Exports embassy of italy in manila to the Philippines by Product Classification As per the Philippine Standard Commodity Classification (PSCC), DSA has focused on the below product group as per classification for trade data; Average Philippines Import “HS Chapter 30: Pharmaceutical products” Duties HS Code (average rates of all 3001 - Glands and other organs for organotherapeutic uses, dried, whether or not powdered; extracts of glands or other products under the organs or of their secretions for organotherapeutic uses; heparin and its salts; other human or animal substances prepared 6-digit categories) for therapeutic or prophylactic uses, not elsewhere specified or included 3002 - Human blood; animal blood prepared for therapeutic, prophylactic or diagnostic uses; antisera, other blood fractions 3001 3.0% and immunological products, whether or not modified or obtained by means of biotechnological processes; vaccines, toxins, cultures of micro-organisms (excluding yeasts) and similar products; cell cultures, whether or not modified 3002 2.2% 3003 - Medicaments (excluding goods of heading 3002, 3005 or 3006) consisting of two or more constituents which have been mixed together for therapeutic or prophylactic uses, not put up in measured doses or in forms or packings for retail sale 3003 2.5% 3004 - Medicaments (excluding goods of heading 3002, 3005 or 3006) consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses (including those in the form of transdermal administration 3004 3.7% systems) or in forms or packings for retail sale 3005 - Wadding, gauze, bandages and similar articles (for example, dressings, adhesive plasters, poultices), impregnated or 3005 5.0% coated with pharmaceutical substances or put up in forms or packings for retail sale for medical, surgical, dental or veterinary purposes 3006 2.75% 3006 – Other pharmaceutical goods Philippines Pharmaceuticals - Italian Exports embassy of italy in manila to the Philippines by Product Classification Medicines in the forms of measured doses or package for retail sales have been the most prominent ones in the Philippines. Import value from Italy experienced a CAGR (2017-2021) of 17.8% and reached EUR47.3 million in 2021. This stable growth has proven an attractive and fast-growing market for Italian retailed medicines in the Philippines. The sharp rise in import value of products under HS Code 3002 attributed to the urgent demand for Covid-19 vaccines. These were notable pharmaceutical products that the Philippines imported the most from Italy in terms of value in 2021. Year Italian exports to the Philippines by Product Classification (Euro) 3001 3002 3003 3004 3005 3006 2017 € 3,131,266 € 24,585,588 € 1,375 € 1,691,650 2018 € 3,210,009 € 28,093,038 € 1,779,834 € 2,368,791 2019 € 28,370 € 35,863,085 € 1,719,909 2020 € 10,672 € 1,789,493 € 30,328 € 40,549,287 € 52,077 € 1,617,214 2021 € 1,135 € 57,813,074 € 47,289,011 € 26,226 € 1,101,528  Global Offices embassy of italy in manila Dezan Shira & Associates Offices Hangzhou [email protected] VIETNAM Ningbo [email protected] Da Nang [email protected] Dezan Shira Asian Alliance Members MONGOLIA SOUTH KOREA JAPAN Qingdao [email protected] Hanoi [email protected] NEPAL CHINA Shanghai [email protected] Ho Chi Minh City [email protected] BANGLADESH UNITED ARAB EMIRATES HONG KONG SAR Shenzhen [email protected] MONGOLIA [email protected] Suzhou [email protected] THE PHILIPPINES THAILAND VIETNAM DEZAN SHIRA ASIAN ALLIANCE MEMBERS CAMBODIA MALAYSIA SINGAPORE Tianjin [email protected] Bangladesh [email protected] INDONESIA Zhongshan [email protected] Malaysia [email protected] HONG KONG [email protected] Thailand [email protected] INDIA The Philippines [email protected] Delhi [email protected] Japan [email protected] Please email [email protected] or visit www.dezshira.com Mumbai [email protected] Cambodia [email protected] INDONESIA South Korea [email protected] CHINA Jakarta [email protected] Nepal [email protected] Beijing [email protected] Batam [email protected] DEZAN SHIRA LIAISON OFFICES Dalian [email protected] SINGAPORE [email protected] Germany [email protected] Dongguan [email protected] UNITED ARAB EMIRATES Italy [email protected] Guangzhou [email protected] Dubai [email protected] U.S.A. 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